Dunedin councillors will decide next week if they want to hit the accelerator on $35.2 million of Three Waters capital spending amid uncertainty about whether associated debt will be taken off the city council’s books.
Such a programme would fund improvements to the resilience of treatment plants and would be the latest injection by the Dunedin City Council into waterworks, funded by increasing debt.
Water assets and debt are set to be removed from the council’s balance sheet and transferred to new regional water entities if the Labour Party leads the next government and reforms continue.
However, the National Party plans to scrap such entities if it wins power at this year’s general election and the party’s local government spokesman Simon Watts has said it would "restore council ownership and control".
In such a scenario, debt would remain with the council.
The council has in recent times backed more Three Waters spending as necessary for getting assets into strong shape for the community under any scenario.
Some city councillors have argued upgrading water assets amid uncertainty connected to reform has been a wise approach, but others have questioned the wisdom of investing significantly in assets the council may not control in coming years.
The Dunedin City Council has already been delivering its capital programme quicker than it budgeted, it had to raise its debt ceiling this year and further acceleration of Three Waters spending could result in one of the Government’s planned entities taking on more debt.
Stepping up the programme would require approval from the Department of Internal Affairs and even a more conservative option would need to be signed off by the department.
The council had signalled in its 2021-31 long-term plan about $145 million of capital expenditure would be needed in 2023-24, but the updated budget has a spend of $177.3million.
Council staff said the updated figure more accurately reflected the delivery phases of various projects.
Most of the Three Waters component is contractually committed.
Councillors will consider on Tuesday an alternative option for Three Waters that would push up overall capital spending from $177.3 million to $212.5 million.
Reducing the risk of network failure has been listed as an advantage for both options.
Higher debt, at least until it is transferred, is considered a disadvantage.
Cr Lee Vandervis also raised concerns this week about the lack of a guarantee Internal Affairs will agree with the council’s assessment about how much debt might be transferred.
Assuming Labour remains in power, the council will certainly have at least $120 million of debt taken off its books and likely tens of millions of dollars more.
Replacing ageing infrastructure has been a focus for the council in the past three years.
Council chief executive Sandy Graham said this week there had historically been lower levels of investment, but councillors had provided clear direction renewing infrastructure was to be a priority.
Over the three-year period from 2021-22 to 2023-24, capital spending is forecast to be $82.6 million more than had been signalled in the 2021-31 long-term plan.
Boosting it by $35.2 million more in 2023-24 would take Three Waters capital spending for the year from $60 million to $95 million.